Have you purchased an indexed universal life insurance policy in Illinois and lost money? Indexed universal life insurance is often marketed as a smart financial investment to fund retirement. Insurance agents and brokers sell these policies by promising high returns and a stream of tax-free income for retirement. In reality, universal life insurance policies are complex, and many individuals lose money due to hidden fees/charges and unscrupulous business tactics. Insurance firms might present unrealistic expectations about earnings or fail to disclose all relevant expenses.
If you believe your insurance agent or broker lied about or misrepresented your life insurance police, contact RP Legal LLC today. Insurance companies must refrain from false or misleading representations when promoting products. If your broker lied to you or withheld important information about your policy, you may be able to file a lawsuit for financial compensation. We have extensive experience managing insurance fraud/misrepresentation cases across the country and can provide the legal representation you need.
Contact our offices online or call (803) 805-7546 to speak to an IUL lawsuit lawyer in Illinois.
What Are IULs and How Do They Work?
Indexed universal life insurance (IUL) is a type of permanent life insurance that contains a cash value component that accrues value. IULs are permanent policies, so they don’t expire after a term and last as long as you pay the premiums. Like other types of permanent life insurance policies, you can adjust your premiums and death benefit depending on your needs.
The distinguishing feature of IULs is how the cash value is invested. The cash value portion of IULs is invested in options that track a specific index, typically the S&P 500. When you pay your premiums, a portion goes to maintain life insurance coverage while the rest goes into the cash value component – but not before the insurance company takes out a hefty fee.
Despite what it might seem, IULs are not investment products because you don’t directly purchase market exposure. Like other types of insurance with a cash value component, you can borrow against the value of your policy, though it can reduce your death benefit.
This structure means that IUL policies are inherently riskier than other types of insurance policies with an investment component. If the chosen index performs poorly, the policy will not gain value. Conversely, a policy can accrue significant value if the chosen index does well.
Insurance Companies Make a Lot of Money on IULs at Your Expense
IULs are often marketed to investors as a flexible method of funding retirement. Brokers and agents use fancy marketing language that obscures the complex and aggressive fee structure. In most cases, insurance agents and brokers receive a nice commission for selling an IUL. At top firms, commissions can reach as high as 100 percent of the policyholder’s premiums.
These commission structures incentivize agents and brokers to pressure clients into purchasing IUL policies that may not be right for them. As time passes and the IUL doesn’t perform as promised, customers learn about all the fees and charges the insurance company took, which may include:
- Commissions fees for agents and brokers
- Premium loads to cover policy expenses
- Charges to cover internal management costs
- Mortality charges to offset the risk of insuring the policyholder
- Expense charges
The problem is that these fees and expenses can fluctuate, and firms won’t provide information when asked. Fees can get so high that the policy loses value, even if the pegged equity index performs well. It is not uncommon for policyholders to receive a huge premium bill and suddenly be unable to fund their policy.
Common Types of Insurance Misconduct That Could Justify a Lawsuit
Below are some of the most common types of insurance misconduct that could be grounds for formal litigation.
Breach of Fiduciary Duty
Brokers and agents have a duty to recommend products that are fit for their clients’ finances, timelines, and age. To that end, brokers must ensure their agents are properly trained and certified and have the appropriate supervision. If firms don’t train their agents or train them to make false statements, they can be guilty of broker negligence.
Recommending IULs to Older Customers
IULs require a specific timeline to accrue in value before policyholders see a real benefit. Firms might market IULs to older customers who won’t be alive to reap the benefits as the policy matures and grows.
Deceptive Marketing Practices and Excessive Fees
Insurance companies use deceptive or misleading marketing phrases to misrepresent fee structures and fail to disclose what fees the policyholder must pay. Brokers might also suddenly change fee structures without notice.
Misleading Illustrations That Overestimate Returns
IUL sales techniques heavily rely on fancy illustrations that create misleading expectations about policy returns. Projected returns might only include the most optimistic projections and leave out factors like market volatility, premium increase, and broker fees.
Fraudulent Practices
In other cases, IUL providers might engage in outright fraud or theft. Firms have been caught selling illegal insurance products and stealing customer premiums. Firms may also sell unregulated insurance products that don’t abide by state laws.
MLM Sales and Recruitment Practices
Many firms and organizations that sell IULs rely on MLM sales tactics. Agents get a hefty commission for recruiting others into the program. So, they are incentivized to sell as many policies as possible to reap the benefits with commissions that can reach as high as 100 percent of the policyholder’s premiums.
What Firms Sell IULs?
IULs have grown in popularity in recent years, but not necessarily because they are good investments. Major firms and insurance giants have recognized their money-making potential, and some have made IULs a major part of their product portfolios. Many firms have been the center of class action lawsuits for misleading or fraudulent life insurance products.
Insurance Companies
- Allianz
- Columbus Life
- Family First Life
- Minnesota Life/Securian Financial
- National Life Group
- Pacific Life
- Protective
- Prudential
- Transamerica
Other firms and organizations that sell IUL and that may have been embroiled in past lawsuits include:
Financial Firms
- Ameritas
- Equis Financial
- Equitable AXA
- Five Rings Financial
- Global Atlantic (Accordia)
- Integrity Marketing Group
- John Hancock
- LifePro Financial
- Mutual of Omaha
- North American
- Penn Mutual
- PHP Agency
- Symetra
- Symmetry Financial Group
- World Financial Group
IUL Lawsuits in Illinois
One large class action lawsuit against Allstate Insurance Company filed in Illinois alleged that the company charged inappropriate fees on universal life insurance policies without notifying the customer, similar to what can happen with IUL policies. The class action lawsuit involved 450,000 policies and was appealed to the state appellate court, which agreed with the lower court’s decision.
What Kind of Compensation Can I Recover in a Lawsuit?
Depending on your circumstances, an attorney from RP Legal LLC can help you recover compensation for the following losses in an IUL lawsuit:
- Cost of premiums paid or overpaid
- Losses in policy value
- Cost of maintaining insurance
- Emotional distress
In some cases, you may also be able to recover punitive damages. Courts might assign punitive damages if the insurance broker or agent displayed particularly egregious or illegal behavior.
RP Legal LLC Can Investigate for Signs of Fraudulent Activity
It is not always easy to prove that your broker misled or defrauded you. Proving insurance fraud or misconduct will require a thorough investigation of your policy and the brokerage that sold it to you. RP Legal LLC can bring our over 100 years of collective experience to the table and confront insurance companies that take advantage of others. We have the skills, resources, and know-how to aggressively pursue insurance companies that violate regulations and misrepresent their products. Common signs of fraudulent activity include:
- Not making suitability determinations when promoting products
- Failing to disclose all fees up front
- Making false or misleading statements to market IULs
- Failing to train or supervise sales agents properly
- Not following company procedures
We have experience going up against some of the largest insurers in the country. You can count on us to assess your case and determine the best options for recovering financial compensation. Contact our offices online or call (803) 805-7546 today for a case consultation with an IUL lawsuit attorney serving Illinois from RP Legal LLC.